Evaluation of the Medicare-DoD Subvention Demonstration: Final Report

The Medicare-Department of Defense (DoD) Subvention Demonstration tested Senior Prime as a managed care approach for enhancing access to affordable health care for Medicare-eligible DoD beneficiaries. While Senior Prime achieved solid beneficiary participation and satisfaction, it also raised a difficult set of challenges involved in applying managed care to the DoD health care system. These challenges included financial issues such as establishing equitable capitation rates and an appropriate level-of-effort baseline, as well as management issues such as effective care management and administrative processes for health plan sites. The basic structures of TRICARE and the DoD health system, including separate management jurisdictions and hierarchical budgeting methods, contribute to the challenges by creating incentives that discourage delivery of cost-effective care. Military treatment facilities need to be motivated not only to provide excellent care but also to manage appropriateness of care and related costs. Although DoD has decided to discontinue the Senior Prime model, many of the lessons learned from this demonstration are applicable to any managed care program that DoD may contemplate in the future.